June 30, 2024

Notable market news this past week (30-June-24)

Here is the Skeptivest roundup of the latest market headlines for the week

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🇮🇳 JPM’s EM Bond Index to Include India: Boosting Market Access and Economic Growth

JPM’s EM Bond Index to include India: JPM’s emerging market bond index will now include India, allocating the highest possible weight of 10% into the mix. Foreign investors can finally access the $1.3t government bond market and foreign inflows will help reduce the government’s dependence on domestic investors to fund borrowing needs, which should incentivize banks to deploy more capital to businesses and lower the cost of funding some text‍

• ‍Why is it only added recently: Indian policymakers have long cited risks from foreign flows impacting local interest rates in their reluctance to open up the country’s debt markets 

Economic backdrop of India: The country had GDP growth of 8% last year. The success of its services exports has helped narrow the external deficit and grown its forex reserves to $650b (world’s fourth largest). The central bank’s focus on reducing inflation has also enhanced its credibility and S&P looking at potential ratings upgrade in the next 2 years

• ‍Opportunities: India could become the third-largest economy by 2027, surpassing Japan and Germany. Its bonds offer the highest yield in Asia

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☕️ Quick fire happenings to note

🌏 Global macro

• US dollar edges higher as markets extrapolated debate on Trump election win: US currency climbed 0.2% on Friday with the index on track for a sixth straight weekly gain. President Joe Biden stumbled through early exchanges in the debate, a performance that may intensify worries about his ability to defeat Trump in the November election. Additionally, Trump reiterated a pledge to impose 10% duties on imports should he win in November, a move that could put upward pressure on inflation, potentially delaying interest-rate cuts
• China to step up incentives to mitigate EU tariffs on Chinese EVs: EU is a big destination for China, accounting for 37% of EV exports from China. To protect itself, China is proposing,  lowering its import tariffs on large-engine vehicles from Europe if Berlin convinces the EU to drop extra duties on Chinese EVs. This is an effort to prevent Beijing from a full-blown trade war with the EU to its escalating one with the United States
• Canada prepares potential tariffs on Chinese EVs: Canada is under pressure to align with actions taken by the US and European Union on imposing tariffs on Chinese EVs as Western democracies are increasingly concerned about China’s overproduction of key goods, seeing it as an effort to dominate supply chains and undercut their own industries. The value of Chinese EVs imported by Canada surged to C$2.2b last year, from less than C$100m in 2022
• Yen weakens past 160: The yen fell to the weakest level since 1986, fanning speculation authorities may be soon be forced to support the currency again in a bid to stem the worst selloff in the developed world. The Japanese currency slumped as much as 0.6% to 160.62 per dollar. A lot is at stake for Japan, which spent a record ¥9.8t ($61.1b) in its most recent bouts of intervention. Citi estimates Japan has $200 to $300b of ammunition to fund any campaign, which would entail selling US dollars and other currencies it holds in cash reserves or even government bonds around the world to buy yen

🏦 Individual stocks/companies

• Amazon sets up rival to Shein and Temu: Amazon is setting up a discounted shop that will fly products to consumers from China. It is a move to replicate the business model of Shein and Temu with cheap products but the packages take longer to arrive than the average turbo-charged Amazon Prime delivery.
• Shein files for London IPO: Fast fashion giant Shein has confidentially filed for a public listing in London as US listing stalls. The retailer has faced mounting backlash tied to allegations of forced labour in its supply chain. The company found itself caught in the crossfire of geopolitical rivalry between the U.S. and Beijing as American lawmakers are concerned about the influence of Chinese companies on the US economy 
• Amazon becomes 5^th company to surpass $2t valuation: E-commerce giant, Amazon’s stock rose 3.4% to $192.70 as optimism around artificial intelligence and potential interest rate cuts this year drove demand for technology-related stock.
• ‍Nike (-22.59% past 5 days) shares slides on weak guidance: Nike shares have plummeted after the company's sales outlook missed expectations, heightening investor concerns about declining demand and competition from Adidas. Nike expects revenue to fall this financial year, contrary to analyst predictions of growth. The company has struggled to launch new products to replace top sellers like Air Force 1 and Dunk sneakers, while its Converse unit saw quarterly revenue drop by 18%.‍
• Novo Nordisk to build $4.1b facility in US: Danish pharmaceutical giant announced the company will spend $4.1b to boost the supply of its blockbuster weight loss drug Wegovy, diabetes treatment Ozempic and other injectable therapies. Construction of the 1.4 million-square-foot facility is expected to complete between 2027 and 2029, adding 1,000 workers to the 2,500 employees already working at its three existing manufacturing plants in North Carolina‍
• Tencent’s new game exceeds $270m in first month: DnF Mobile is off to a hot start in China as its sales doubled China’s most lucrative title, Honor of Kings. The company allowed users to download the game directly from its own sources, avoiding the commission cuts from traditional app stores. Tencent has relied heavily on its own messaging platform, WeChat and fee-free third-party stores like TapTap to distribute its games
• FedEx (+18.27% past 5 days) rallies with strong earnings: The company exceeded expectations on sales and EPS, driven by strong performance in its Freight and Ground business, despite minor weaknesses in Express. Improved margins, due to effective cost-cutting measures, showcased excellent management following the challenges of its Q4 2023 report.
• Goldman Sachs initiate coverage on Affirm with a buy call: After partnering with Apple to incorporate its buy-now-pay-later service in Apple Wallets, GS initiated coverage of the BNPL leader on Monday, slapping on a “Buy” rating and calling for a ~40%

🇸🇬 Singapore related

• Real wages in Singapore grew 0.4% in 2023, similar to 2022: According to the Ministry of Manpower, fewer firms gave wage increases to their employees, with the proportion declining from 72.2% in 2022 to 65.6% in 2023. A total of 6.5% of establishments cut wages, and 27.9% of firms held wages steady. Looking ahead, businesses surveyed by MOM foresee an uncertain business environment, establishments might adopt a cautious stance with respect to wage increases